Intel in touch

Editor's note: Intel Capital, the venture capital arm of the chip giant, used to be recognized by its investment in IT and communication firms such as Sohu.com and Neusoft Group.

But now the Silicon Valley investor has decided to jump on the bandwagon to fund clean technology (cleantech) companies, which some venture capitalists say could be the "next big thing". In late October, Intel Capital made its first foray to China cleantech sector, as the government's emphasis on alternative energy and environmental protection can presumably mean great market potential.

Trony Solar, a Shenzhen-based company, is one of Intel Capital's first pick. The company, established in 1993, is one of China's biggest makers of thin-film solar energy equipment, with sales in more than 20 nations. The startup would receive $20 million from Intel Capital, which it will use to ramp up production capacity. Intel Capital also signed an agreement to invest in NP Holdings Limited, a technology company focused on massive electricity storage systems.

Over the years, Intel Capital has invested into nine cleantech companies across the world. Stephen Eichenlaub, managing director of Intel Capital's Emerging Platform Technologies and Cleantech Sector, talks with China Business Weekly reporter Wang Xu about cleantech investment.

Q: Why did you invest in Trony?

A: Trony is an established company and has more than one hundred patents. We like them because of the company's unique manufacturing process. They have created a very unique, scalable and low-cost manufacturing process, which allows it get actually ahead of other players in the sector technologically. We also get along with each other because of the company's deep focus on technology. For example, they can make photovoltaic modules of different sizes and shapes, which could be used on the surface of ordinary buildings.

Q: Besides Trony, do you have any other investments in the solar energy area?

A: We have two other photovoltaic investments besides Trony and we definitely see an important role for solar energy around the world within our generation. One is an US-based company SpectraWatt. Intel actually developed the basic technology and later we spun it out and made it a stand-alone company in 2008. Another one is Sulfur Cell, which also is a thin-film solar company in Germany. Sulfur Cell enjoyed a great consumer market, largely due to local government's subsidy. Though the government has already moved to cut the subsidies, the good news is a number of solar companies now have reached the capacity where their cost per unit is going down thanks to the rising production volume.

Q: What do you think about the market potential for cleantech companies in China?

A: In China, there is great potential demand. For example, there are still many parts of China that lack reliable electrical grids. And their circumstances can be improved with solar, wind or hydroelectric power sources, which do not require bringing long-distance power lines. There are already strong environmental and economic forces. China has already decided to adopt policies to encourage the development of clean energy and the demand should go very high, very fast.

Q: But for the moment, China's domestic cleantech market, especially the clean energy market, is still very small. Is that a concern for you?

A: Indeed, China's domestic cleantech market is very small. That's partly because most of the technologies are still very new and the price is too high for broad adoption. But over time, as the production capacity grows, it will help reduce the cost, just as we have seen in semiconductor industry.

Q: What are Intel Capital's investment focuses in cleantech?

A: We have three focus areas for cleantech. One important part is power generation, which mainly means alternative energy. Another is energy efficiency, which is the technology that allow us to use less energy with less cost, rather than trying to create power. The third area is electric vehicles. Nowadays, every car has more chips and gets more 'intelligent' and has more communication systems. And with the growing appreciation of the environmental impact of traditional vehicles, we think there will certainly be an increasing number of people choosing hybrid vehicles and eventually electric vehicles. We can provide some of semiconductor capacities as well as WiMAX connectivity, which is a mobile broadband technology that can enable cars to communicate with other cars. There is a large opportunity for semiconductor content in electric vehicles.

Q: What are your other focuses in China?

A: We are open to all. I think there will be some interesting alternative power-generating companies here. In addition to solar, we are also looking at those small-scale wind power companies, the ones with a production capacity of kilowatts rather than megawatts. For the larger ones, our money is too small to be meaningful. They need to get funding from major banks.

Q: What are the challenges for cleantech investment?

A: A lot of the challenge is still economics. Cleantech is still more expensive than existing methods, especially for alternative energy. In the area of energy efficiency, it's more about understanding the customers' needs.

Q: What's the difference between investing in IT and communication (ICT) companies and investing in cleantech companies?

A: The simplest difference is the regulatory policy environment. Around ICT investing, it's mostly about cost and performance per watt. When you get into cleantech area, we also need to consider the local government incentives and tax policies.

Q: Have you ever see any real disruptive technology in cleantech so far?

A: So far in cleantech, the biggest winners are from the solar energy sector, just like China's Suntech and LDK. Moreover, there is tremendous hope for biofuel to be disruptive technology, which is the "half" of our investment focus in cleantech. Another promising technology is taking non-recyclable plastic as the feedstock to create biofuel. For example, bringing old PC cases or other sources of plastics into some form of oil. We see a couple of companies are doing this but the economics are not quite there yet. We certainly are willing to encourage the reduction of plastic in landfills.

(China Daily 11/17/2008 page5)